The real exchange rate is the nominal rate exchange defined as foreign currency per dollar times
A)U.S.prices minus foreign prices.
B)prices in the United States divided by foreign prices.
C)foreign prices divided by U.S.prices.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The real exchange rate is calculated as the nominal exchange rate multiplied by the ratio of prices in the US to prices in a foreign country. This is because the real exchange rate represents the relative purchasing power of two currencies, and the ratio of prices reflects how much goods and services can be purchased in each country with a given amount of currency.

The Real Exchange Rate Is the Nominal Rate Exchange Defined